codes of good on i, · staatskoerant, 9 februarie 2007 no. 29617 3 general notice notice 112 of...

No. 29617 3 STAATSKOERANT, 9 FEBRUARIE 2007

GENERAL NOTICE

NOTICE 112 OF 2007

DEPARTMENT OF TRADE AND INDUSTRY

CODES OF GOOD PRACTICE ON BLACK ECONOMIC EMPOWERMENT

I, Mandisi Mpahlwa, Minister of Trade and Industry, hereby -

(a) issue the following Codes of Good Practice under Section 9( 1) of the Broad- Based Black Economic Empowerment Act, 2003 (Act No. 53 of 2003); and

(b) determine that these Codes will come into operation on the date of this publication.

MANDISi MPAHLWA MINISTER OF TRADE AND INDUSTRY DATE: 09-02-2007

4 No. 29617 GOVERNMENT GAZETTE, 9 FEBRUARY 2007

REPABOLIKI YA AFERlKA BORWA

REPUBLIEK WAN SUID AFRIKA

OAD-BASED BLACK ECONOMIC EMPOWERME

CODES OF GOOD PRACTICE

STAATSKOERANT, 9 FEBRUARIE 2007 No. 29617 5

ES

Index of Code Series

Code Series

000

10 0

200

300

400

500

600

700

800

Code Title

Framework for measuring Broad-Based Black Economic Empowerment

Measurement of the 0 Empowerment

Measurement of the Management Control Element of Broad-Based Black Economic Empowerment

Measurement of the Employment Etement of Broad-Based Black Economic Empawermen t

Measurement of the Skilts Development Element of Broad-Based Black Economic Empowerment

Measurement of the Preferential Procurement Element of Broad-Based Black Economic Empowerment

Measurement of the Enterprise Development Element of Broad-Based Black Economic Empowerment

Measurament of the Socio-Economic Development Element of Broad-Based Black Economic Empowerment

Measurement of Qualifying Small Enterprises of Broad-Based Black Economic Empowerment

rship Element of Broad-Based Black Economic

Index for generic Statements

Statement Number Code Series and Statement Title

000

003

004

100

102

10 3

200

300

400

Code series 000 -

Code series 000 -

Code series 000 -

Code series 100 -

Code series 100 - Code series 100 - Code series 200 -

Code series 300 -

Code series 400 -

General principles and the Generic Scorecard

Guidelines for the development and gazetting of sformation Charters and Sector Codes

for specialised Enterprises

The general principles for measuring Ownership

Recognition of the Sale of Assets

on of Equity Equivalents for Multinationals

The general principles for measuring Management Control

The general principles for measuring Employment Equity

The general principles for measuring Skills Development


CODE SERIES RAMEWQ8RM FOR MEASURIN ' $RQ&D-BASE ' ECQ,NOMIc,, EMPOWERMENT

STATEMENT 000: GENERAL PRINCIPLES AND THE GENERIC SCORECARD

Issued under section 9 of the Broad-Based Black Economic Empowerment Act of 2003

Arrangement of this statement


1 Objectives of this statement

The objectives of this statement are to:

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

2

2.1

2.2

2.3

2.4

2.5

2.6

2.7

specify interpretative principles of B-BBEE;

specify the application of the Codes and the basis for measurement under the Codes;

specify the qualifying thresholds for businesses to qualify as Exempted Micro- Enterprises (EME) or Qualifying Small Enterprises (QSE);

specify the method of measuring start-up enterprises;

specify the elements of B-BBEE measurable

specify the Generic Scorecard;

specify the basis for determining compliance by entities with the Codes;

provide for the Transitional Period before the compulsory use of th starts, and

define the duration for the applicability of the Codes.

er the Generic Scorecard;

Key principles

The fundamental principle for measuring B-BBEE compliance is that substance takes precedence over legal form,

g the provisions of the Codes any reasonable interpretation consistent with the objectives of the Act and the B-BBEE Strategy must take precedence.

The basis for meas of the measured e

Any misrepresentation or attempt to misrepresent any enterprise’s true B-BBEE Status may lead to the disqualification of the entire scorecard of that enterprise.

-6BEE initiatives under the Codes is the B-BBEE compliance the time of measurement

Initiatives which split, separate or divide enterprises as a means of ensuring eligibility as an Exempted Micro-Enterprise. a Qualifying Small Enterprises or a Start-up Enterprise are a circumvention of the Act and may lead to the disqualification of the entire scorecard of those enterprises concerned.

Any representation made by an Entity about its B-BBEE compliance must be supported by suitable evidence or docum on. An Entity that does not provide evidence or documentation supporting any ive, must not receive any recognition for that initiative.

Method applies to measurin reasonably possible, consiste

indicator, the same all other applicable


3

3.1

3.1.1

3.1.2

3.1.3

3.1.4

3.2

3.2.1

3.2.2

3.2.3

3 3

4

4.1

4.2

4.3

4.4

4.5

5

5.1

Application of the Codes

The following entities are measurable under the Codes:

all public entities listed in schedule 2 or schedule 3 (Parts A and C) of the Public Finance Management Act;

any public entity listed in schedule 3 (Parts B and D) which are trading entities which undertake any business with any organ of state, public entity or any other Enterprise, and

any enterprise that undertakes any business with any organ of state or public entity;

any other enterprise that undertakes any business, whether d tor indirect, with any entity that is subject to measurement under paragraph 3.1.1 to 3.1.3 and which IS seeking to establish its own B-BBEE compliance.

The basis for measuring the B-BBEE compliance of an entity in terms of paragraph 3 1 is -

paragraph 4, in the case of an Exempted Micro-Enterprise (EME);

the QSE statements in Code 800, in the case of a Qualifying Small Enterprise (QSE);

the Generic Scorecard, in the case of other enterprises

Despite 3.2, a Sector Code published in terms of Statement 003 may provide the basis for measuring enterprises within that sector.

Eligibility as an Exempted Micro-Enterprise

Any enterprise with an annual Total Revenue of R 5million or less qualifies as an Exempted Micro-Enterprises, .

Exempted Micro-Enterprises are deemed to have B-BBEE Status of “Level Four Contributor” having a B-BBEE procurement recognition of 100% under paragraph 6.3.

agraph 4.2, an Exempted Micro-Enterprise qualifies for a promotion to a s of ”Level Three Contributor” having a 8-BBEE procurement recognihon

of 110% under paragraph 6.3 if i t is - more than 50% owned by black people or by black women.

Exempted Micro-Enterprises are allowed to be measured in terms of the QSE scorecard should they wish to maximise their points and move to the next procurement recognition level

Sufficient evidence af rprise IS an auditor’s certificate or similar ce

ification as an Exempted Mi ate issued by an accounting or verification agency.

Eligibility as a Qualifying

Any enterprise with an annual Total Revenue of between R5 million and R35 million qualifies as a Qualifying Small Enterprise.


5.2

16

6.1

6.2

6.3

6.4

7

71

72

73

74

75

7.6

7.7

A Qualifying Small Enterprise must select any four of the seven Elements of B-BBEE for the purposes of measurement under the ualifying Small Enterprise Scorecard contained in Code800 Where a QualifyingSmall Enterprisedoes not make a selectlon. its four best element scores will be used for the purposes of measurement

Start-up enterprises

Start-up enterprises must be m statement for the first year follo applies regardless of the expect

Start-up Enterprrses are deemed to have a B-BBEE Status of "Level Four Contributar" having a B-BBEE procurement recogniti

In order to qualify as a Start-up Enterprise, the enterprise must provide an independent confirmation of its status.

rporation. This provision venue of the start-up ente

100% under this paragraph

Enterprises must submit a

scorecards must use annualised data.

The Elements of B-BBEE in terms of the Generic Scorecard The Ownership Element, as set out in Code series 100, measures the effective ownership of enterprises by black people

The Management ntrol Element, as set out in Code series 200, measures the effective control of enterprises by black peaple.

The Employment Equity Element, as set out in Code series 300, measur intended to achieve equity in the workpl under the Act, and the Equity Ac t

The Skills Development Element, as set out in Code series 400, measures the extent to which employers carry out initiatives designed to develop the competencies of black employees.

The Preferential Procurement Element, as set the extent to which enterprises buy goods and s BBEE pracurement recognition levels.

The Enterprise Development Element, as set out in Code series the extent to which Enterpris the development and sustai

rry out initiatives intended to assist and accelerate of other Enterprises.

The Socio-Economic Development out in Code series 700, measures the extent that contribute towards Socio-Economic De that promote access to the economy for black people.

ntributions Element, as set


8 The Generic Scorecard

8.1

8.1.1 elements of the scorecard;

8.1 2 weightings, and

8.1.3

The following table represents the Generic Scorecard and contains the:

the Code series reference that specify the mechanisms for measurement and calculation of each of the Elements of the scorecard (Code series 100 - 700).

I Ownership I 2Opoints I 100 I I L 1 c ---- - 1 L ~ Management control 1 lopoints i 200 1

nterests d certain cate

9.1

9.2

10

10.1

10.2

10.3

black people with disabilities

Elements of the Gener

12 No.29617 GOVERNMENT GAZETTE, 9 FEBRUARY 2007

10.4

10.5

10 6

10.7

10.8

10 9

11 11.1

11.1.1

11.1.2

11.2

11 3

Such Accreditation Standards govern the terms and conditions on which the Accreditation Body may grant, refuse to grant, revoke or suspend an accreditation of a Verification Agency.

Those verification agencies wishing to appl r accreditation vtill do so through SANAS.

The dti encourages the establishment of an independent Industry Body that will provide guidance to the verification industry through the development and maintenance of high quality and reliable BEE verification services

The dti together with the relevant Industry Body will from time to time develop Verification Methodologyand other relevant practices that will be used as standards by all verification agencies.

The dti together with the Accreditation Body will implement such mechanisms as may be necessary to ensure that Verification Certificates are accurate and reliable

The dti will establish a publicly accessible central database containing the information underlying each verification Certificate

Transitional period

For the first year after the commencement of this statement, a measured entity may elect to use - the Generic Scorecard, or;

the transitional scorecard

Thereafter, all B-BBEE compliance measurement under the Codes for Medium and Large enterprises is Subject to the use of the Generic Scorecard.

The transitional scorecard assigns a BEE Status based on the Ownership and Management Control of the entity calculated in terms of the formula below:

, Where : '

A is the indicative BEE Status during the transitional period B is the total score achieved under Code series 100 and 200

- _ . . - .

12 Adjustment Of Thresholds

12.1 The Minister may, by notice in the Gazette, adjust the thresholds in paragraphs 4 to 6. Any such changes apply to compliance reports prepared for enterprises after a 12-

th period following the gazetting of the adjustment

13 Duration of the Codes

13 1

13.2

A Code remains in effect until amended, substituted or repealed under section 9 of the Act.

The Minister will review the Codes following the end of the tenth year following the commencement date of this statement, despite the aforementioned, annual reviews will take place to monitor the implementation of B-BBEE throughout the economy.

I


STATEMENT 003: GUIDELINES FOR DEVELOPING AND GAZETTING OF TRANSFORMATION CHARTERS AND SECTOR CODES




1 Objective of this statement

The objectives of this statement are to specify:

1.1

1.2

1.3

1 4

1.5

2

2.1

2.1.1

2.1.2

2.2

2.3

2.3.1

2.3.2

2.4

3

3.1

3.1.1

3 1.2

3.1.3

3.1.4

the manner of gazetting Transformation Charters under secbon 12 of the Act,

the process for developing and gazetting of Sector Codes under section 9 of the Act;

the status of Transformation Charters and Sector Codes;

the status of enterprise B-BBEE plans, and

recommend an approach for drawing up Transformation Charters.

Procedure for developing and gazetting of Transformation Charters

The representative body of a sector seeking to gazette a Transformation Charter under section 12 must.

apply in writing to the Minister; and

provide evidence of compliance with section 12 of the Act

The Minister may refuse an application to gazette a Transformation Charter if the applicant has failed to comply with section 12 of the Act.

If the Minister refuses to grant an application under paragraph 2.2,

the Minister must notify the applicant of that decisron 'in writing within two months; and

an applicant may reapply for the gazetting of that Transformation Charter by revising its submission.

The Minister must gazette that Transformation Charter as soon as it is reasonably possible following the grantingof an application under paragraph 2.1.

Procedure for developing and gazetting of Sector Codes

The following principles apply to developing Sector Codes:

there must be common commercial and other characteristics within the entities operating in the sector which would make it feasible to formulate a transformation charter subject to the proposed Sector Code:

the proposed Sector Code must fully address all the Elements in the Generic Scorecard;

the proposed Sector Code must use the same definitions in respect of all beneficiaries as those used in the Codes;

the proposed Sector Code must use the same calculation methodologies to measure compliance as those used in the Codes,


3.1.5

3 1.6

3.1.7

3.2

3.2 1

3.2.2

3.2.3

3.3

3 3.1

3.3.2

3.3.3

3.3.4

3.3.5

3.4

3.4.1

3.4.2

3.5

3.6

4

41

the proposed Sector Code may deviate from Targets and Weightmgs used in the Cades only where those deviations are jusbfiable based on sound economic principles, sectoral characteristics or empirical research;

nt for measurement ode may introduce a new principles, sectma1

the proposed Sector Code must clearly define its scope of application:

The representatwe body of a sector seeking to gazette a Sector Code under section 9 must:

apply in writing to the Minister:

ate the process by which the arter has B-BBEEn devetoped

e of compliance with sect

The Minister must refuse an application under this paragraph 3 if the proposed Sector Code:

ses any of the principles any of the Elements referred to in the referred to in paragraph 3.1.2;

contains deviations from the calculation methodologies applicable in measuring B- BBEE compliance as referred to in paragraph 3.1.4;

contai ations in the definitions of beneficiaries of B-BBEE as referred to in paragraph 3.1.3;

C

U

contains inadequacies or a patential for ambiguity in defining the scope of the sector

ister decidesagainst

stencies in the Targets and Weighti fed under that paragraph; or

referred to in paragraph 3.1.5

d to in paragraph 3.1.7.

refer the application

refer the documents to the Ad

The Minister may issue a draft Sector Code for public comment in terms of section 9( 5 ) of the Act

inister may gazette the Transformation e Act.

Status of Transformation Charters and Sector Codes

The gazetting of a Transformation Charter under the commitment to promote B-BBEE in the app organs of state or public entities.

ion 12 of the Act is evidence of ble sector and is not binding on


4.2 Code series 000 to 700 and any statements under those Codes remain applicable to enterprises in the sector, despite the gazetting of their Transformation Charter under section 12 of the Act

A Sector Code enjoys equal status with that of any other Code 4.3

5 Recommended Model for Developing Transformation Charters

5 1 This paragraph provides guidance to sectors wishing to develop Transformation Charters. It is not a legal requirement

Recommended Model for developing Transformation Charters.

The following represents the matters needing consideration by sectors developing a Transformation Charter for gazetting under section 12 of the Act.

5 2

5 2 1

5 2 1 1 the sector seeking to gazette their Transformation Charter shauld interact or transact with the organs of state or public entities,

5 2 1 2 there should be common commercia! and other characteristics within the entities forming part of the proposed sector,

5.2 1 3 the sector should be significant having regard to

5 2 1 3 1 the national strategic importance of the sector as determined by government, aod

5.2 1 3.2 the volume and value of transactions taking place between the sector and organs of state or public entities collectively - this is measurable by reference to the total volume and value of transactions taking place within the sector

5 2 2 The following represents a recommended model for developing a Transformation Charter

5.2.2.1 Public Proclamation of Charter: there must be a public proclamation of the object of developing a Transformation Charter

5 2 2.2 Setting of Charter Mandate: the initiators of the Charter process propose setting the mandate of the Charter and the Charter's overall objectives These initiators should then present a proposed mandate for the Charter, to relevant stakeholders for consideration and comment The final mandate of the Charter must reflect the concerns and needs of the stakeholders

5 2 2 3 Appointment of a Steering Committee the initiators of the Charter process appoint a Steering Comrnittee This Steering Committee should represent relevant groups of stakeholders and should consist of senior and influential members of entities, organisations or departments in the sector

5 2 2 4 Appointment of relevant Working Groups the Steering Committee appoints several Element specific working groups working groups to aid in drafting the Charter

are desirable

5 2 2 5 First Draft Based on recommendations bytheappointed Working Groups, thesteering Committee must compile the first draft of the Charter for presentation to stakeholders

I STAATSKOERANT, 9 FEBRUARIE 2007 No. 29617 17

5 2 2.6 Consultation with Stakeholders the Steering Committee will communicate the key elements of the first draft of the Transformation Charter, including a draft of its scorecard to stakeholders

5.3 Recommended Consulting Process, Representatrves and Stakeholder !dentifcabon

5.3.1 The consultahon process for developing a Transformation can take any of the follcwing forms.

5.3.1 1 a major gathering of the key stakeholders in the sector,

5.3 1 2 workshops addressing particular issues in the Transformahon Charter,

5.3.1.3 sector-wide road shows, or

5.3.1.4 other interactive mechanisms that would ensure effective communication with and participation by the relevant stakeholders

5.3.2 The relevant stakeholders may include

5.3.2.1 key enterprises within the sector,

5.3.2.2 industry bodies for the sector and the relevant chamber of commerce;

5.3.2.3 government and in parhcular, the relevant government departments havingjurisdrctlon over the particular sector,

5.3.2.4 labour bodies or the relevant trade unions,

5.3.2.5 industry regulators and civil society organisations. and

5.3.2 6 any others with a relevant interest in the sector

5.3.3 The steering committee should have equitable representation to enable participation by all the different stakeholders in the Transformation Charter formulation

5.3 4 Implementation of innovative mechanisms for ensuring that under resourced parties contribute in the key strategic decisions is a key consideration, especially in the following stages:

5.3.4.1 setting up various working groups

5.3 4 2 setting the mandates of the respective charter commlttees,

5.3.4.3 actively taking part in the various charter committees;

5.3.4 4 outlining the key principles and qualitative undertakings of the Transformation Charter;

5.3.4.5 setting targets and weightings for the sector as contained in the balanced 6-6BEE scorecard:

5.3.4.6 providing for implementation, reporting and monltormg mechanisms,

5.3.4.7 presentation of the Transformation Charter to the Advisory Council, the ministry in the government responsible for the relevant sector and to the Minister of Trade and Industry

G07-011707-6


5.3.4.8 settmgthe mandate and the powers of the Charter Cou

5.3.4 9 ensuringapplicattion of good corpo or any executive body reporting

The Role of Charter Cou 5.4

ended model for setting up Charter Councils:

f stakeholders in the members of the Charter

n of good corporate governance principles in the Charter Council.

5 4.2

5 4.2.1 to provide guidance on sector-specific matters effecting B-BBEE in entities within

5.4.2.2 to compile reports on the status of broad-based black economic empowerment within

5.4.2.3 to share information with sector members, approved accreditation agencies or

The functions of the Charter Council may include

the sector;

the sector, and

5.4.3

6

6.1

6.2

6.2.1

6.2 2

6.2.3

6.2.4

6.3

the Minister.

The Charter Councils should report to Minister and to the Advisory Council on progress made by the sector subject to the relevant Transformation Charter Such reports should typically contain qualitative and quantitative information sectoral performance, including details about all the elements of the sector's B balanced scorecard.

Variation of lndi ors in Codes 200 and

A Sector Code may allow the use of indic Codes 200 and 300 as a means of k i n g th

Sectors adopting this approach must

consider using indicators that are consistent with the principles contained in the EE Regulations;

consider ail relevant factors such as seniority, expertise, scarcity of skill-set organisational role and responsibility and geographic location:

base the definition of occupational levels on sound and empirical research undertaken in the sector by a reputable institutlon; and

if the indicators include salary scales, consider providing for a default cost of living or inflation adJUStrnent in the salary scales, even if the sector intends to amend those salary scales annually.

The gazetting of a Sector Code does not affect any employer's obligations to comply with the EE Act and its regulations.

s that differ irom those contained in levant Measurement Categories.

Issued under section 9 of the Sroad-Based Black Economic Empowerment Act of 2003


1 Objective of this statement


1.1

111

11.2

1.1.3

1.1 4

1.1.5

1.1.6

1 2

2

2.1

2.2

2 3

2 4

2 5

provide guidance about the treatment of Ownership for Specialised Enterprises , for 6-BBEE purposes, of.

companies limited by guarantee,

Higher Education Institutions;

Non-profit Organisations;

public entities and other Enterprises wholly owned by organs of state;

Public Benefit Schemes: and

section 2 1 companies, and

specify scorecards applicable to Measured Entities subjwt to this statement.

General principles

Public entities and other Enterprises wholly owned by organs of state are incapable of evaluation of black ownership under Code series

Higher Education lnstrtutions are not public entities under the Public Finance Management Act of 1999. They are incapable of evaluation of black ownership under Code series 100

Companies limited by guarantee and section 2 1 companies have no shareholding. They are incapable of evaluation of black ownership under Code series 100. This does not imply that companies limited by guarantee and section 21 companies sharing in the ownership of other Enterprises cannot contribute towards black ownership to such Enterprises as provided for in Statement 100.

Non-profit Organisations and Public Benefit Organisations generally do not have any beneficial ownership and are incapable of evaluation of black ownership under Code series 100 This does not imply that Non-pro& Organisations and Public Benefit Organisations sharing in the ownership of other Enterprises as broad-based ownership schemes cannot contribute towards black ownership to such Enterprises as provided for in Statement 100

Wherever any of the entities listed in paragraphs 1 and 2 require evidence of their own B-BBEE compliance. they will usethe Adjusted Generic Scorecard If those entities are also Qualifying Small Enterprises, they will use the Adjusted Qualifying Small Enterprises Scorecard


3 The ADJUSTED Generic Scorecard

3 1 The following table represents the Adjusted Generic Scorecard and contains the

3.1 1 Elements of the scorecard;

3.1.2 weightmgs, and

3 1.3 the Code series reference that specify the mechanlsms for measurement and calculation of each of the Elements of the scorecard (Code series 100 - 700).

Weighting Code series reference i ZOO ;

-4 1 Element

I Management control 1 15points L __. .__ .-_ ._ ___ __. _. - _. -- -___ 1 - - --------- ---

I i

~

I 1

3 2 All other terms of statement 000 apply to Measured Entities subject to this statement, mutatis mutandis

4 The ADJUSTED Qualifying Small Enterprises Scorecard

4 1 The following table represents the Adjusted Generic Scorecard and contains the:

4.1.1 Elements of the scorecard;

4.1.2 weightings, and

41.3 the Code series reference that specify the mechanisms for measurement and calculation of each of the Elements of the scorecard (Code Series 100 - 700).

4.2 A Measured Entity, SubJectto thisstatement, that is a Qualifying Small Enterprise must choose any four of the six Elements of B-BBEE against which their B-BBEE compliance will be measured under the A sted Qualifying Small Enterprise Scorecard.

5 Important Clarification

The status of Socio-Economic Development Contributions made to any of the types of entities in paragraphs 1 and 2 under Code series 700 is not dependent on such entity’s scorecard result, but rather the nature of the contribution itself and the identity of that contribution’s beneficiaries.


1

1.1

1.2

1.3

1.4

1.5

2

Objectives of this Statement


specify the scorecard for measuring the ownership Element of Broad-Based Black Economic Empowerment (9-BBEE);

define the key measurement principles associated with the ownership Element

specify the specific measurement principles applicable to various types of Enterprises.

specify the specific measurement princ applicable to Various types of Equity Instruments;

specify the formula for measuring Voting Rights, Economic Interest. Realisation Points and bonus points.

Of 6-BBEE,

The Ownership Scorecard

The following table represents the indicators and method for calculating a score for ownership under this statement:

--.- Category ! Ownership indicator f Weighting points I Compliance Target 1 .-----.__._ L ~ .I ___________________.____

Voting rights: i j 2.1 I I 2.1.1 Exercisa ng Rights in the Enterprise in 1

~

I the hands of black

1 the hands of black women _.______._._._I 1 ............................................................................. 7'

I i 2.1.2 Exercisable Voting Rights in the Enterprise in ~

12.2 Economic Interest: I

I I 1

! I ! 1 2.5% i

I i I 1

I 1 i I I

__.._________-__-_____I_-_______-_._-__ ---)- ------------------ I Wrest of black people in the 1 4 j 25%

1 10% j ----- - 4

I I i I 1 __-_.--. ~ 1- _._.__._________,___.___._______________.________.__..___.______I___. L 1 4

I 1 j 10.1 1 2.3.1 Ownership fulfilment j l

~ 2.2.3.4 black Participants in Go-operatives I 1

1 Refer to paragraph \ 12.3 Realisation paints: I i 1

F-. ~..- ._.___._I_._-_.--___-___.___ ~

I I


3 Key Measurement Principles

3.1 General principles

3 1.1 An Enterprise receives pointsfor participation by black people in its rights of ownership, using the ownership scorecard in paragraph 2 Black people may hold their rights of

p in a Measured Entity as direct Participants or as Participants through some

3.1.1.1 a company with shares;

3.1.1.2 a close corporation.

3.1.1.3 a co-operative:

3 11.4 any form of juristic person recognised under South African law,

3.1 1.5 a partnership or other association of natural persons;

3 1.1.6 a Broad-Gased Ownership Scheme:

3.1.1.7 an Employee Ownership Scheme; and

3.1.1.8 a Trust.

3.2 The FlowThrough Principle:

3 2 1 As a general principle, when measuring the rights of ownership of an people in a Measured Enterprise, only rights held by natural persons are relevant If the rights of ownership of black people pass through a jurisbc person, then the rights of ownership of black people in that jurtsbc person are measurable. Thls principle applies across every tier of ownership in a multi-tiered chain of ownership until that chain ends with a black person holding rights of ownership.

3.2 2 The method of applying the Flow-Through Principle across one or more intervening juristic persons is as follows

3 2 2 1 Multiply the percentage of the Participant's rights of ownership in the juristic persons through which those rights pass by the percentage rights of ownership of each of those juristic persons successively to the Measured Enterprise; and

3 2.2 2 the result of this calculation represents the percentage af rights of ownership held by the Participant

3.3 The Modified Flow-Through Principle:

3 3.1 The Modified Flow-Through Principle applies to any BEE owned or controlled company in the ownership of the Measured Enterprise

3.3 2 In calculating Exercisable Voting Rights under paragraph 2.1.1, and Economic Interest under paragraph 2.2 1 the following applies, Where in the chain of ownership, black people have a flow-through level of participabon in excess of 50%, then only once in that chain may such black participation be treated as if it were 100% black

3.3 3 The Modified Flow-Through Principle may only be applied in the calculation of the indicators in paragraphs 2.1.1 and 2 2.1. In all other instances, the Flow-Through Principle applies


3 4

3 4 1

The Exclusion of specified entibes when determining ownership

When determining ownership in a measured entity, ownership held directly by organs of state or public entities must be excluded.

In calculating their Ownership score, Measured Enterprises must apply the Exclusion Principle to any portion of the~r Ownership held by Organs of State or Public Entities

Despite paragraph 3 4.1 and 3 4 2, the Minister may by notice in the gazette, designate certain Public Entitiesas BEE Facilitators. In calculatingtheir Ownershipscore, Measured Enterprises must treat BEE Facilitators as having rights of Ownership held

3 4 2

3 4 3

3 4 3 1 100% by Black People;

3.4 3 2 40% by Black Women,

3 4 3 3 10% by black designated groups

3 4 3 4 without any acquisition debts; and

3.4.3 5 without any thi

3.4.4

3 4 5

3.4.6

3.5

3.5.1

When determining ownership in a measured entity, rights of ownership of Mandated Investments may be excluded. The maximum percentage of the ownership of any measured entity that may be so excluded is 40%

A Measured Entity electing not to exclude Mandated Investments when it IS entitled to do so, may either treat ail of that ownership as non-black or obtain a competent person's report esbmating the extent of black rights of ownership measurable in the Measured Entity and originating from that Mandated Investment.

A Measured Entity cannot selectively include or exclude Mandated Investments and an election to exclude one mandated investment is an election to exclude all Mandated Investments and visa versa.

The recognition of ownership after the sale or loss of shares by black parttcipants.

A P following criteria

red Entity is allowed to recognise a portion of black ownership after a black nt has exited through the sale or loss of shares subject to the

3.5.1 1 the black participant has held shares for a period of 3 years:

3.5.1.2 value must have been created in the hands of black people;

3 5 1 3 transformatlon has taken place within the measured enterprise

3.5 2 black participation arising from continued recognition of black ownership cannot contribute more than 40% of the score on the ownership scorecard.

3.5.3 In the case of a loss of shares by the black investor, the following additional rules apply

3.5.3 1 a written tripartite agreement between the Measured Enterprise, the black Participant and a lender must record the loan or securityarrangement unless the Measured Entity is the lender: and

3.5.3.2 The period over which the points were allocated or recognised will not exceed the period over which the shares were held.


3.5.4

.4.1

3.5.4.2

4

4.1

4.1.1

4.1.2

5

5.1

5.1.1

1.2

.3

5.1.4

6

The ownership points under this pa will be calculated by multiplying t

atareattributabletothe Measured Entity

red Entity based on the balanced scorecard at the

e Measured Enterprise on the date of The ownership points tha sale or loss.

Broad-based Ownership and Employee Ownership Scheme’s

Black Participants in Broad-Based Ownership Schemes and Employee Share Ownerships Schemes holding rights of ownership in a Measured Entity may contribute:

d of the Measured

the total points o sured Entity if they

Private Equity Funds

a Private Equity Fund as Id by black people, where the Private Equity Fund meets the

followtng criteria:

ssociated with the E . rights of owners

black people;

more than 50%of fits made bythe Private Equity Fund after realising any investment must by written agreement, accrue to black people;

the Private Equity Fund manager must be a BEE Owned Company as defined, and

more than 50% of the value of funds invested by any Private Equi at were at least

Section 2 1 Companies and Companies Limited by Guarantee

may elect to include or exclude e purposes of measuring

6.1 A Section 2 1 company or company limited by guarantee that houses a 6road-Eased Ownership Scheme or an Employee Ownership Scheme IS Subject to the provisions governing those types of schemes and not to this paragraph.

When a Measured Entity e to exclude such companies, it can do so by excluding up to 40% of the level of ownership completely from the determination of its compliance with the o w e

6.2


6.3

6.4

6 4.1

6.4.2

7

7.1

7 1 .1

7.1.2

8

8 1

8.1.1

8.1.2

8.1.3

A Measured Entity electing not to exclude section 21 companies or companies limited by guarantee when it is entitled to do so, may either treat all of that ownership as non- black or obtain a competent person’s report estimating the extent of black rights of ownership measurable in the Measured Entity and originating from those section 21 companies or companies limited by guarantee.

Black Participants in a Section 21 Company holding rights of ownershrp in a Measured Entky may contribute:

a maximum of 40% of the total points on the ownership scorecard of the Measured Entity if they meet the qualification criteria for Broad-Based Ownership Schemes set out in Annexe lOO(B).

100% of the total points on the ownership scorecard of the Measured Entity if they meet the additional qualification criteria set out for Broad-Based Ownership Schemes in Annex lOO(B).

Trusts

Black Partxipants in a Trust hotdrng rights of ownership in a Measured Entity may contribute.

a maximum of 40% of the total points on the ownership scorecard of the Measured Entity if the trust meets the qualification criteria for Trusts set out in Annexe 1OO(B)

of the total points on the ownership scorecard of the Measured Entity if they meet the addibonal qualification criteria set out for Trusts in Annex 100(B).

Options and share warrants:

Exercisable voting ill be recognised where a Parkipant holds an instrument granting th ht to acquire an Equity Instrument or part thereof at a future date, if t

The Exercisable Voting Rights attached to that instrument are irrevocably transferred to the holder for the option period and are exercisable by the holder before acquiring the Equity Instrument;

the value of any Economic Interest is irrevoca paid to the holder of that instrument before the exercise of that right.

The value of an instrument must be determined by using a Standard valuation method for calculating the N e t value.

hts and Economic inte

requirements are met

transferred for the option period and


9

9.1

9.2

9.3

10

10.1

Equity Instruments Carrying Preferent Rights

An Equity Instrument carrying preferent rights is measurable in the same manner as an ordinary Equity instrument.

An Equity Instrument carrying preferent rights that has the characteristics of a debt, regardless of whether the debt is that of an Enterprise or of a Participant, IS an ordinary loan If the debt is that of a black Participant, i t may be subject to measurement under Current Equity Interest

In evaluating an instrument that has a hybrid nature including the characteristics of a debt, only that portion that represents a debt, will be measured under current equity interest. The remainder IS measurable as an ordinary equity instrument.

Net Value

Ownership Fulfilment occurs.

10.1.1 on the release of all black Participants in a Measured Entity from all third-party rights arising from the financing their transaction with the Measured Entity: or

10 1 2 if all black Participants in the Enterprise have never been subject to any such third- party rights.

10.1 3 A score of 7 points for Net Value is a requirement for awarding the Ownership Fulfilment point

11 The Bonus Points

11 1 A Measured Entity with 25% black Economic Interest, can receive a maximum of 2 bonus points for a 10% holding of Economic Interest by black new entrants

A Measured Entity with 25% black Economic Interest can receive a maximum of 1 bonus point for a 10% holding of Economic Interest by black participants in’

11.2

11.2 1 Employee Ownership Schemes,

11.2 2 Broad-Based Ownership Schemes, and

11.2 3 Co-Operatives


. . . . . . . .

Annexe lOOA - Examples of Mandated lnvestments

.......................................................... ......................................................... Dwcrlption of imestment ............................................................

Investments made by or for a collective investment scheme as defined in the Collective Investments Scheme Control Act of 2002

Investments made by or for a pension fund as defined

_ _ __.. m hem

defined in the Medi member's funds

s Act of 1998 out of

Investments made by or for long-term insurers as defined in the Long-Term Insurance Actof 1998 out of policyholder funds

Investments made by or for a friendly society as defined in the Friendly Societies Act of 1956

for a ned in the depo s opposed

Investments made by or for a mutual bank as defined in the Mutual Banks Actof 1993outofdepositor funds as opposed to own reserves

... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Portion Subbctto Exclusion Pdncipte ............................................................

full value

_____.__ _ _ . . _ - _ . . --. -

full value

portion recorded as made out of members funds . . . . . . . . . . . . . . . . . . . . .

...................................................... portion recorded as made out of policyholder funds

full value

...........................................................

30 No. 29617 GOVERNMENT GAZETTE, 9 FEBRUARY 2007 ~

Annexe ZOO{B)

RULES ON CERTAIN TYPES OF ENTERPRISES

1

1.1

1.1 1

11.2

113

114

115

116

117

2

21

2 1.1

212

213

214

22

2.2 1

222

223

Rules for Broad-Based Ownership Schemes:

The following rules applyto Broad-Based Ownership Schemes

the Management Fees of the scheme must not exceed 15%,

the constitution of thescheme must record the rules governingany portion of Economic Interest received and reserved for future distribution or application,

at least 85% of the value of benefits allocated by the scheme must accrue to black people,

at least 50% of the fiduciaries of the scheme must be independent persons having no employment with or direct or indirect beneficial interest in the scheme,

at least 50% of the fiduciaries of the scheme must be black people and at least 25% must be black women;

the chairperson of the scheme must be independent, and

on the winding-up or termination of the scheme, all accumulated Economic Interest must be transferred to beneficiaries or an entity with similar objectives

Rules for Employee Share Ownership Schemes:

The following rules apply to Employee Share Ownership Schemes (ESOP),

the scheme constitution must define the Participants and the proportion of their claim to receive distributions,

a written record of the name of the Participants or the use of a defined class of natural person satisfies the requirement for identification,

a written record of fixed percentages of claim or the use of a formula for calculating claims satisfies the need for defining proportion of benefit, and

the fiduciaries of the scheme must have no discretm on the above mentioned terms, and

The Participants must take part in

appointing at least 50% of the fiduciaries of the scheme.

managing the scheme at a level similar to the management role of shareholders in a company having shareholding,

the constitution or other relevant statutory documents, of the scheme must be available on request. to any Participant in an official language in which that person is familiar and


2 2 4

2.2 5

3

3.1

311

3.1.2

3.1.3

3.1.4

4

41

4.1.1

4.1.2

5

5.1.

5.1.1

5 1.2

All accumulated Economlc Interest of the scheme is payable to the Participants at the earlier of a date or event specified in the scheme constitution or on the termination or winding-up of the scheme, and

the scheme fiduciaries must presentthe financial reports of the scheme to Participants yearly at an annual general meeting of the scheme

Rules for Trusts

qualification criterla for the recognnrbon of Trusts is as follows.

The trust deed must define the beneficiaries and the proportion of their entitlement to receive d istr i butions,

A written record of the names of the beneficiaries natural person satisfies the requirement for identific

A written record of fixed percentages of entitlement or the use of a formula for

The trustees must have no discretion on the above mentioned terms: and . On winding-up or termination of the trust all accumulated Economic Interest must be transferred to the beneficiaries or to an entity representing the interest of the participants or class of beneficiaries.

the USE: of a defined class of

lating entitlement sat~sfies the need for

Additional Criteria Applicable to Trusts:

For a Measured Entity to obtain the maximum points on it's Ownership scorecard from shareholding by a Trust, the Measured Entity must be in possession of a certrficate issued by a competent person to the effect:

That the Trust was created for a legitimate commercial reason which must be fully

That the terms of Trust do not dir the Codes and the Act.

or indirectly seek to circumvent the p

Additional Criteria Applicable to and Employee Ownership Schemes:

ad Based Ownership Schemes

For a Measured

Share Ownership Scheme.

a track-record of operating as a Broad-Based Ownership Scheme or Employee Share ow , or in the of such of capacity te as a Em are Ownership Scheme;

Operational capacity must be evidenced by suitably qualified and experienced staff in sufficient number, experienced professional advisors, operating premises and all other necessary requirements for operating a business.

to obtain the maximum points on it's owne uirements must be met bya Broad-Based Scheme or Employee


Annexe 100 (C)

1 Measurement of Voting Rights

11 The calculation of the ownership indicators provided for in paragraphs 2.1.1 and 2.1.2 IS as follows

1 2 If an Enterprlse gains a score in the formula above that IS more than the Weighting points in paragraph 2 1. that Enterprlse will only receive the Weighting points

2 Measurement of Economic Interest

2 1 The calculation of the ownershlp indicators provided for in paragraphs 2.2.1 to 2.2.3 IS as follows

2.2 If an Enterprise gains a score in the formula above that is more than the Weightlng points in paragraph 2 2, that Enterprlse will only receive the Weighting points.


3 Calculation of Deemed Net Value

In calculating the “Deemed Net Value” referred to In paragraph 4 below, the following formula applies

4 Net Value

4.1 The “Netvalue” points in paragraph 2.3.2 IS the lower result of Formula A and Formula B below

G07-011707-C


4.2

4.3

4.3.1

4.3.2

4.4

5

If an Enterprise gains a score in paragraph 4.1 that is more than the Weighting points in paragraph 2.3 2, that Enterprise will only receive the Weighting points

Ownership Fulfilment occurs

on the release of all black Participants in a Measured Entity from all third-party rights, or

when black Participants have never been subject to any third-party.

A minimum score of 7 points for Current Equity Interest is a requirement for the award of the Ownership Fulfilment point

Calculation of the Recognition of Ownership after the Sale or Loss of Shares by Black Participants:

The calculations in paragraphs 3.5.1 and 3.5.3 use the following formula


6 The Bonus Points

6.1 The calculation of the bonus points uses the following formula:


CODE SERJES LOU: THE MEASUREMENT OF THE

BLMX ~~~~~~~~ 'EMPOWERMENT OWNERSHIP ELEMENT OF BROAD-BASED

STATEMENT 102: RECOGNITION IN THE SALE OF ASSETS

issued under section 9 of the Broad-Based Black Economic Empowerment Act of 2003

Arrangement of thls statement



The object~ves of this statement are to

1.1 Set out the conditions where the Sale of Assets, Equity Instruments and other Businesses will be recognised.

Set out how the Ownership points will be determined 1.2

2 Application

2.1

2 1.1.1 an asset:

2 11.2 a business; or

2 1.1 3 Equity Instruments in an Enterprise.

A transaction in terms of this statement may involve thesale of.


3 1 General principles:

3.1.1 A Seller that has concluded a transaction involving a sale of asset, Equity Instrument or business with an Associated Enterprise may claim the benefits provided for in this statement in its own Ownership Scorecard.

Where a Seller has claimed benefit in terms of the Ownership scorecard for the Sale of Asset, Equity Instrument or Business i t may not claim benefits under the Enterprise Development Element

3.1 2

3.2 Qualification Criteria:

3.2.1

3.2.1.1 Must result in the creation of sustainable businesses or business opportunities in the

For Ownership points to be recognised the transaction.

hands of black people: and

3.2 1.2 Result in the transfer of specialised skills or productive capacity to black people

3.2.2 A Sale of Asset, Equity Instrument and Business must involve a separate Associated Enterprise which has

3.2.2.1 no unreasonable limitations as to its clients or customers, and

3.2.2.2 clients, customers or suppliers other than the Seller.

3.2.3 Any operational outsourcing arr Enterprise must be negotiated at

The following transactions do not constitute Qualifying Transactions.

ents between the Seller and the Associated length on a fair and reasonable basis.

3 2.4

3.2 4.1 transfers of business rights by way of license, lease or other similar legal arrangements

3.2.4.2 sales of franchises by franchisors to franchisees, but includes sales of franchises from

not conferring unrestricted ownership; and

franchisees to other franchisees or to new franchisees.

4

4.1

4.1.1

4.1.2

4.1.3

4.2

4.3

4.4

4.4.1

4 4.2

4.5

5

5.1

5.1 1

5.2.2

scorecard must be based on: the value of the transaction. the value of Equity Instruments held by black Participants in the Associated Enterprise;

Enterprise; and

~ 1 1 calculations in terms of paragraph 4.1.1 to 4.1.3 must method. fb Seller may claim the point for Ownership Fulfilment only if both the Seller and the Associated EnbrpriBe cornply with the requiremmb for the award of that Point.

Equivalency Percentages under this statement apply only td the ownership indicators in paragraphs 2.1 and 2.2 of the Ownership Scorecard;

do not apply to the ownership indicators in paragraphs 2.3 and 2.4 of the Ownership Scorecard.

The Seller must include the E lency Percentages in its own Ownership Scorecard as if those percentages arose black ownership of Equity Instruments in the Seller. me Equivalency Percentages for the indicators in paragraphs 2.1 and 2.2 of the Ownership Scorecard can be calculated in t e r m of Annexe 102(A).

ng value of the Acquisition Debt of black PartiCiWn~ in the Associated

a Standard valuation

Recognition Of Sale Of Asset, Equity Instruments And Businesses ASellerseek'ngrecognitiOn Of a Transaction in h O w n ~ $ h j p S ~ r ~ a r d mustdetermine that under paragraph 4 in compliance with paragraph 2.3 of statement 000:

for the first three YWrS after the transaction, based on data current on date of ~asurement;

for each year thereafter, based on: 5.1.2.1 the Indicator Percentages at the date of measurement; and 5.1.2.2 the values of the Qualifying Transaction and benefit to the Seller at the date of

measurement in the third year after the transaction.

STAATSKOERANT, 9 FEBRUARlE 2007 No. 29617 39

ANNEXE 102 (A)

This formula determines the equivalency percentages for the indicators in paragraph 2.1 and 2.2 of theownership Scorecard.

A is the Equivalency Percentage for each of the indicators in paragraphs 2.2. and 2.2 af the Ownership Scorecard B is the value of the Qualifying Transadon ta the Associated Enterprise determined using a Standard valuation method C is the value of the Seller determined using a Standard valuation method D is the Indicator Percentages of the Assooated Enterprise

. - . _. - - ___-. __.. - -

40 No. 29617



The objectlves of this statement are to:

1 1 definethe means bywhich Multinationals may apply for recognition of Equity Equivalent Programmes,

1.2 specify how contributing towards the Ownership Element of 5-BBEE by Multinatianals is measurable,


Any Equity Equivalent Contributions towards the Ownership Eiement of 5-5BEE made by Multinationals are measurable against the value of their operations in the Republic of South Africa

3 Recognition of Equity Equivalent Programmes

3 1 The Minister may, approvecertain Equity EquivalentProgrammes aftertheMultinationa1 has consulted with the sectoral line ministry, Premiers or other stakeholders in any government department, provincial government or local government with respect to their equity equivalent proposal

3 2 Any Equity Equivalent Programme forming part of a Sector Code constitutes an approved programme

3 3 Equity Equivalent Programmes are preferably Sector Specific. but the Minister may consider requests for approval of programmes that are not Sector Specific.

3 4 Equity Equivalent Programmes may involve:

3.4 1 programmes that support

3 4 1 1 the Accelerated and Shared Growth lnitiatrve for South Africa,

3 4 1 2 the Joint Initiative for Priority Skills.

3 4 1 3 the National Skills Development Strategy,

3.4 2 programmes that promote enterprise creation in respect of cooperatives that are

3 4 2.1 more than 50% owned by black people; or

3.4.2.2 more than 30% owned by black women; or

3 4 2.3 more than 50% owned by members of black designated groups, ,

3 4 3 any other programmes that promote Socio-Economic advancement or contribute to the overall socio development of the Republic of South Africa

3 5 Equity Equivalent Programmes must include:

3 5 1

3 5.2

3 5.3

a full description of programme objectives and projected outcomes:

qualification criteria for participation in the programme,

bmelines for implementation and delivery with milestones against which progress IS I measurable; and

42 No. 29617 GOVERNMENT QAZETTE, 9 FEBRUARY 2007

3.5.4

3.6

details about the sponsors of the programme

Equity Equivalent Programmes are limited to Multinationals subject to a Global Practice.

Equity Equivalent Programmes may have any 3.7

3.7.1 enterprises in which.

3.7.1.1 black people hold more than 50% of the exercisabl of the economic interest,

the followir;g as their beneficiaries

3.7.1.2 black women hold more than 30% of the exercisable voting rights and more than 30%

3 7.1.3 Black Designated Groups hold more than 50% of the exercisable voting rights and

of the economic interest, and

more than 50% of the economic interest; or

3.7.2

4

4.1

4.2

4.2.1

4.2.2

4.3

5

5.1

5.1.1

communities, natural persons or groups beneficiaries are black people and the s by black people

natural persons where at least 75% of the e percentage of economic value 1s derived

Measurement of Equity Equivalent Contributions on the Ownership Scorecard

The ownershipscoreof a Multinational participating in an EquityE is calculated in terms of paragraph 4 3. A Multinational parti Equivalent Programme cannot receive any points for ownership in Code Series 100 other than this statement.

Contributions to Equity Equivalent Programmes are measured as actual contributions made using the general principle set out in codeseries 600 and 700 against any of the following targets.

25% of the value of the South African operations of the Multinational, determined using a Standard Valuation; or

4% of Total Revenue from its South African operations annually over the period of continued measurement;

The Ownership Score under an in paragraphs 4.2 must be cal

uity Equivalent Programme usingeither of the targets ated in terms of Annexe lOS(A).

Examples of Equity Equivalent Programmes

Enterprise creation.

If the equity equivalent contribubon of a Multmational involves the creation of a new Enterprise.

5.1.1 1 the new Enterprise must qualify as a Value-Adding Enterprise;

5.1.1.2 the creation of the new Enterprise must comply with the requirements for a Qualifying Transaction as defined in statement 102;

5 1.1.3 the creation of the new Enterprise cannot contribute tothe Multinational’sscore under Code series 600, and

STAATSKOERANT, 9 FEBRUARIE 2007 No.29617 43

5.1.1.4 the equity equivalent contribution must involve the provision of interest free loans, No-Gain Grants or Human Capital Investments tothe new Enterprise equivalent in value to 50%of the new Enterprise's projected operational costsfor the first3 yearsfollowing its establishment

5.2 Investment in social advancement:

5.2.1 An equity equivalent contribution of a Multinational that involves enhanced Socio- Economic Development.

5.2.1.1 must complyfully with Codeseries 700; and

5.2.1.2 cannot form part of the Multinational'sscore under Code series 700.

6 Specific Rules on Multinationals

6.1 Any contributions towards the ownership Element of B-BBBBEE made by Multinational Businesses or South African Multinationals are measurable against the value of their operations in the Repub

In calculating their ownership score, Multinational Businesses and South African Multinationals must apply the Exclusion Principle to any portion of the business value of their South African operations gained from non-South African sources. A Standard valuation method must be used to determine the value of the South African operations.

6.2

Multinational Businesses may recognise sales of can Enterprises to black people,'on the following

basis:

the non-South African Enterprise must form part of the chain of ownership between the Multinational Business and its eventual holding company; and

the transaction must comply with South African exchange contrd requirements; and

the percentage of the value of the Equity Instruments sold to the value of the Multinational Business represents the recognisable b k claim to Economic Interest and

6.3.1

6.3.2

6.3.3

6.3.4 the percentage of Exercisable Voting Rights ceded to the buyers of the Equity Instruments in the Multinational Business represents the recognisable black right to Exercisable Voting Rights; and

the rights of ownership in the Equity Instruments are comparable to rights that wwld have accrued had the Equity Instrument B-BBEEn in the Multinational Business.

3.5

...


ANNEXE 103(A)

This formula is for determintng the Ownership Score under an Equity Equivalent Programme using either of the targets in paragraph 5.2, where the contribution is made upfront on a once off basis

This formula is far determi using either of the targets basis towards a ten year targ

Equity Equivalent Programme ibution is made on an annual


CODE SERIES 200: MEASUREMENT OF THE

BLACK ECONOMIC EMPOWERMENT MANAGEMENT CONTROL ELEMENT OF BROAD-BASED

STATEMENT 200: THE GENERAL PRINCIPLES FOR MEASURING MANAGEMENT CONTROL




i. Objectives of this Statement

The objectives of this statement a

1.1

1.2

the scorecard for measuring the Management Control Element of 6-BBEE,

define the key measurement principles associated with the Management Control Element of B-BBEE; and

the calculations for measuring compliance. 1.3

2 Management Control Scorecard

Thefollowingtable representsthe indicatorsand method for calculatinga score for Management Control under this statement:

j 2.1 Board participation:. I

1 I 2.2.2 Black Other Top Management usrng the Adjustad I 1 1 Recognition for Gender I ,

~ 40%

1 2.3 Bonus paints: ~ I I Black Indewndent Non-Executtue 8ward Members I 'i i

3 Common Examples of top Management

The inclusion of the following examples of Top Management is for guidance purposes only

3.1

3.2

4

4.1

4.2

4.3

Senior Top Managementpositionsinclude thechief executiveofficer. thechief operating officer, the chief financial officer and other people holding similar positions

Other Top Management positions include the chief information officer the head of marketing, the head of sales, the head of public relations, the head of transformation, the head of human resources and other people holding similar positions

Key Measurement Principles

A Measured Entity receives points by meeting the targets for participation of black people and black women at Board and Top Management level

A Measured Entity must use the data in calculating its score under the Management Control scorecard used in its returns filed with the Department of Labour under the Employment Equity Act. This does not apply to Measured Entities exempt from filing such returns

A Measured Entity that does not distinguish between Top Management and Senior Management may include its Senior Management under this statement. If a Measured Entity adopts this approach -

, I


4 3 1 the corresponding targets for Senior Management in Code series 300 will apply to the Management Control scorecard,

4 3.2 Senior Management included in this statement is not measurable under statement 300

4.4 If a Measured Entity does not distinguish between Senior Top Management and Other Top Management. then Top Management is measurable as a single indicator with a Weighting of 5 points under paragraphs 2 2.1 and 2.2.2

4 5 If Measured Entities do appoint Non-Executive Independent Board Members, they are encouraged to appoint persons who do not serve in that capacity for any other Measured Entity.

5 Calculating the Adjusted Recognitian for Gender

The Adjusted Recognition for Gender is calculated in terms of formula "A" in Annexe 200(A).

6 Calculating Compliance

6 1 The Management Control indicators provided for in the Management Control Scorecard must be calculated in terms of formulas 'B' and 'C" in Annexe 200iA)

6.2 If a Measured Entity gains a score for a Management Control indicator that is more than the relevant weighting points, that Enterprise will only receive the Weighting points.

48 NO. 29617 GOVERNMENT GAZETTE, 9 FEBRUARY 2007

ANNEXE 200(A)

A: Calculation of the Adjusted Recognition for Gender


6: Calculating Compliance

The calculation of the management indicators provided for in paragraphs 2 1.1, 2 1.2., 2 2 1 and 2.2.2 is as follows:

. . . ...


L Objectives of this statement

The objectives of this statement are t o

1.1

1.2

specify the scorecard for measuring Employment Equity contributions to 8-BBEE,

define the key measurement principles for measuring the Employment Equity contnbutrons to 5-EEEE; and

define the formula for calculating the score for Employment Equity. 1.3

2 Employment Equity Scorecard

2 1 The following table represents the criteria used for deriving a score for Employment Equity under this statement:

j s I 4 I pwcentags ofall such employees usingffw Adjusted Recagnition ; I for Gender !

~iac~ . ; employees in junior Management as a I 4

2%

43%

63%

68% I I

2.2 The Weighbng points in the Employment Equity scorecard represent the maximum number of points possible for each of the criteria.


3.1 Wherever possible. a Measured Entitymustusethedatathatitfiles withtheDepartment of Labour under the Employment Equity Act in calculating its score under the employment equity scorecard.

3.1.1 No Measured Entity shall receive any points under the Employment Equity Scorecard unless they have achieved a sub-minimum of 40% of each of the targets set aut on the Employment Equity Scorecard in respect of the both five year periods.


3.2

3.3

3 4

3.4.1

3.4.2

3.5

4

In order for a Measured Entity to achieve bonus points at a particular level, the entity needs to meet or exceed the EAP targets

A Measured Entity exempt from filing returns must compile its data for calculating its score under the Employment Equity Scorecard using the guidelines set out in the Employment Equity Act and its EE Regulations.

If the organisational structure of a Measured Entity does not distinguish between Middle Management and Junior Ma ate those Measurement Categories against the targets for J weighting points for the Measurement Categories must be adjusted as follows:

Senior Management - 8 points;

Junior Management - 6 points Black women employees In each Measurement Category qualify for enhanced recognition using the Adjusted Recognition for Gender.

Calcutating the Adjusted Recognition for Gender

The Adjusted Recognition for Gender is calculated in terms of the formula set out in Annex (300A).

5 Measurement of the Employment Equity Criteria

The criteria in the Employment Equity scorecard is measured in terms of the formula set out in Annex 300(A)


ANNEX 300 (A)

A: CALCULATING THE ADJUSTED RECOGNITION FOR GENDER

The calculation of the Adjusted Recognition for Gender IS as follows:

B: Measurement of the Empl merit Equity Criteria This equation explains the method of measurement of the criteria in the Employment Equity scarecard:


I Objectives of this Statement

The ObJeCtIVeS of this statement are to specify

the scorecard for measuring the Skills Development Element of B-BBEE,

define the key measurement principles associated with the Skills Development Element; and

the formula for measuring the Skills Development Element of 8-BBEE.

1.1

1.2

1 3

2 The Skills Development Scorecard

2.1 The following table represents the criteria used for deriving a score for Skills Development under this statement.

1 2.1.1 Skills Development Expenditure on any program s~ecified in the Learning Programmes Matrix’ I 2 1.1.1 I Programmes specified in the Learning Programmes I 1 Matrix for black employees as a percentage of Leviable [ 1 Amount usingthe Adjusted Recognition for Gender I

Skills Development Expenditure on Learning ~ (5 I 3%

2.2 The Weighting points in the Skills Development scorecard represent the maximum number of points possible for each of the criteria.


3.1

3.3.1

Measured Entities receive points on the Skills Development scorecard only if:

they are in- compliance with the requirements of the Skills Development Act and the Skills Development Levies Act;

they have registered with the applicable SETA,

they have developed a Workplace Skill

they have implemented programmes targeted at developing Priority Skills generally,

3.1.2

3.1.3

3.1 4 ecifically, for black employees.

3.2 Expenses on scholarships and bursaries for employees does not constitute Skllls Development Expenditure if the Measured Entity can recover any portion of those expenses from the employeeor if the grant of the scholarship or bursary is conditional Despite the afore going, if the right of recovery or the condition involves either of the following obligations of the employee. the expenses are recognisable:

the obligation of successful completion in their studies within thetime period allocated, or

3.2.1


3.2.2

3.3

3 4

3 5

3.6

3.6.1

3 6.2

3.6.3

3 6 4

3 6.5

3 6.6

3 6 7

3.7

4

the obligation of continued employment the Measured Entity for a period following successful completion of their studies is t more than the period of their studies

Any Skills Development Expenditure by a Measured Entitythat is an ABET programme is recognisable at a multiple of 1.25 to the actual value of such Skills Development Expenditure

Skills Development Expenditure includes any legitimate expenses incurred for any Learning Programme offered by a Measured Entity to its employees evidenced by an invoice or appropriate internal accounting record.

Skills Development Expenditure arising from Uncertified Learning Programmes or from Category G Learning Programmes under the Learning Programmes Matrix cannot represent more than 15

Legitimate training expenses includes:

costs of training materials;

costs of trainers;

costs of training facilities including costs of catering;

scholarships and bursaries;

course fees.

the total value of Skills Development Expenditure

accommodation and travel; and

administration costs such as the organization of training including, where appropriate, the cost to the Measured Entity of employing a skills development facilitator or a training manager.

Salaries or wages paid to an employee participating as a learner in any Learning Programme only constitute Skills Development Expenditure if the Learning Programme is a Learnership or falls within Category B; C; or D of the Learning Programme Matrix.

Calculating the Adjusted Recognition for Gender

The calculation of the Adjusted Recognitton for Gender is set out in formula “A” in Annexe 400(B)

5 Measurement of Skills Development Indicators

The formula that explains the method of measurement of the criteria in the Skills Development scorecard is in terms of formula “B” in Annexe 400(B)

6 The Learning Programme Matrix

The Minister may from time to time, by notice in the gazette, revise or substitute the Learning Programme Matrix. Any changes will only be applicable to Compliance Reports prepared for a Measured Entity for the first 12-month period following the gazetting of a revision or substitution

Q


Annexe 400A - Learning Programme Matrix

Institution-based theoretical instruction alone - formally assessed by the institution

Institution-based theoretical instruction as well as some practical learningwith an employer or in a simulated work environment - formally assessed through the institution

Recognised or regstere6 structured experiential learning in the workplace that is required after the achievement of a qualification - formally assessed by a statutory occupatronal or professional body

Occupationally-directed instructional and work- based learning programme that requires a formal contract - formally assessed by an accredited

- ___ __. - _. . __ - - _-_ - - - __ - __. ._ .

body

Occupationally-directed instructional and work- based learning programme that does not require a formal contract - formally assessed by an accredited body Occupationally-directed informal instructional programmes

Work-based informal programmes

Institutional instruction

Mixed mode delivery with institutional instruction as well as supervised learning in an appropriate workplace or simulated work environment

Structured learning in the workplace with mentoringor waching

. ___ ___ .-__I_ _ _ _-_ - __ __ Institutional instruction together with structured, supervised experiential learning in the workplace

Structured, supervised experiential learning in the workplace which may include some institutional instruction

Structured information shanng or direct instruction involving workshops, seminars and conferences and short courses

Informal training

.- - .__ .-_ .

Institutions suck as universities and colleges, schools, ABET providers

Institutions such as universities and colleges, schools, ABET providers and workplace

Workplace

lnstitutron and workplace

Workplace and some institutional as well as ABET providers

Institutions, conferences and meetings

Workplace

- ___ - - - . ..

Recognised theoretical knowledge resultlng in the achievement of a degree, diploma or certificate issued by an accredited or registered

Theoretical knowledge and workplace expenence with set requirements resulting in the achievement of a degree. diploma or certificate issued by an accredited or registered formal institution of learning

Occupational or professional knowledge and experience formally recognised through registration or licensing

_ _ . . . ._ __. __ -- - .. _ _ -. .-_ -. . Theorettcal knowledge and workplace learning. resulting in the achievement of a South

certificate or other similar occupational or professional qualification issued by an accredited or registered formal institution of learni ng

Credits awarded for registered unit standards

Continuing professional development, attendance certificates and creditsagainst registered unit standards (in some instances)

Increased understand of job or work context or improved performance or skills -- - .. __ __. .__ -. - __ - ._ __ - ._ . . . -.


ANNEXE 400(B)

A: Calculating the Adjusted Recognition for Gender

The calculation of the Adjusted Recognitlon for Gender is as follows

B: Measurement of

This formula explains the method of measurement of the criteria in the scorecard:

No. 29617 59

lsaued under section 9 of the Broad-Based Black Economic Empowerment Act of 2003


I Objectives of this Statement


1.1

1.2

1.3

14

1.5

2

21

the Preferential Procurement scorecard;

the key measurement principles applicable to calculating Preferential Procurement contributions to 6-BBEE;

a basis for the award of an enhanced recognition status to certain categories of Preferential Procurement;

principles applicable when calculating B-BBEE Procurement Spend; and

the formula for calculating the indi Procurement scorecard

Preferential Procurement Scorecard

The following table represents the criteria for deriving a score for Preferential Procurement under this statement

j 2.1.3.1 I points); or

Suppliers that are 50% black owned (3 out of 5 1 !

I

I i ! I I I I 2.1.3.2 Suppliersthatare 30% black womenowned. (2outaf

> j 5 points) ~ . . ~ . ~ ~ ---.--.._-----.------.--I_--._---.-----..__._.A i ~ ~ 1 1 L I - --. - _.


3.1 The Weightingpoints in the Preferential Procurementscorecard representthe maximum number of points possible for each of the criteria.

3 2 All goods and services procured by the Measured Entity, other than any portron specifically excluded in terms of this statement, is measurable in calculating its Total Measured Procurement Spend

3.3 If a Measured Entity procures goods and services from a Supplier that IS.

3.3.2 a recipient of enterprise development contributions from the Measured Entity under Code series 600, the recognisable B-BBEE Procurement Spend that can be attributed to that Supplier is multiplied by a factor of 1.2; and

3.3.2 a Value-Adding Supplier, the recognisable B-BBEE Procurement Spend that can be attributed to that Supplier is multiplled by a factor of 1.25.

3 4 This statement applies to all areas of procurement.

STAATSKOERANT, 9 FEBRUARIE 2007 No. 29617 61 ~~~ ~~~~~~

4 Black Owned Professional Service Providers and Entrepreneurs

4.1 A key intention of this statement is to promote the use by Measured Entities. of black owned professional service providers and entrepreneurs as suppliers.

Black owned professional service providers and entrepreneurs that comply with all the elements of the Codes:

4 2

4 2.1 qualify for recognition in all three criteria in the preferential procurement scorecard: and

4 2 2 qualify as value-adding suppliers thereby attracting the benefits in paragraph 3.3.2

5 Total Measured Procurement Spend

The following procurement is measurable within Total Measured Procurement Spend:

5.1

5.2

5.3

5.4

5.5

5.6

5.7

5.8

5.9

5.10

5.11

Cost of sales all goods and services procured that comprise the cost of the sales of the Measured Entity,

Operational expenditure: all goads andservices procured that comprisethe operational expenditure of the Measured Entity:

Capital expenditure: all capital expenditure incurred by the Measured Entity:

urement: all goods and services procured from organs of state and in Schedules 2 and 3 to the Public Finance Management Act

of 1998:

Monopolistic procurement: all goods and services procured from suppliers that enjoy a monopolistic position:

Third-party procurement: all procurement for a third-party or a client., where the cost of that procurement is an expense recorded in the Measured Entity’s annual financial statements,

Labour brokers and independent contractors: any procurement of the Measured Entity which is Outsourced Labour Expenditure;

Pension and medical aid contribut payments made to any post retirement funding scheme or to a medical aid or si medical insurer by a Measured Entity for its employees, excluding an ortions of such payments which are a contribution to a capital investment of the employee. The scheme or insurer must issue a certificate dividing payments between thecapital investment portion and the balance to establish the amount that is measurable within Total Measured Procurement Spend;

Trade commissions: any commissions or similar payments payable by a Measured Entity to any other person pursuant to the business or trade of the Measured Entity;

Empowerment related expenditure: all goods and services procured in carrying out EE. The Total Measured Procurement Spend does not include the actual

d under Code series 600 or 700 but does include any ing those contributions;

Imports. all goods and services that are imported or procured from a non-South African source; and


5.12 Intra-group procurement. except as provided In statement 002, all goods and services procured from subsidiaries or holding companies of the Measured Entity

6 Exclusions from Tatal Measured Procurement Spend

The following list is the only permissible exclusions from Total Measured Procurement Spend recognisable in terms of paragraph 5:

6.1

6.2

6 2.1

6.2.2

6.3

6.4

6.5

6.5.1

6.5.2

6.6

6.6.1

6.6.1.1

6.6.1.2

6.6.2

6 6 2.1

6 6.2.2

Taxation: imposed imposed

any amount payable to any person which represents a lawful tax or levy by an organ of state authorised to impose such tax or levy, including rates by a municipality or other local government,

Public sector procurement:

all goods and services procured from organs of state and public entities listed in Schedule 1 of the Public Finance Management Act of 1999 Despite this, procurement

nt authority, which is a reseller of that tron Level of the primary Supplier of the

ured Entity from a loca measurable at the 8-BB

in any event, any procurement of any goods or services from any organ of state or public entity that enjoys a statutory or regulated monopoly in the supply of such goods or services, is excluded;

Salaries, wages, remunerations, and emoluments. any amount payable to an employee as an element of their salary or wage and any emolument or similar payment paid to a director of a Measured Entity,

Pass-through third-party procurement: all procurement for a third-party or a client that IS recorded as an expense in the third-party or client's annual financial statements but is not recorded as such in the Measured Entitjis annual financial statements:

Empowerment related procurement:

investments in or loans to an Associated Enterprise,

investments, loans or donations qualifying for recognition under any statement under Code series 600 or 700,

Imports: the following imported goods and services.

imported capital goods or components for value-added production in South Africa provided that:

there is no existing local production of such capital goods or components: and

importing thosecapital goods or components promotes further value-added producbon within South Africa,

imported goods and services other than those listed in paragraph 6 6 1 if there is no local production of those goods or services including, but not limited to. imported goods or services that - carry a brand different to the locally produced goods or services: or

have different technical specifications to the locally produced goods or services


7

71

7.2

7.3

7.4

8

8.1

8.2

Measurement of 6-BBEE Procurement Spend

5-BBEE Procurement Spend IS the value of the procurement falling within paragraph 5 and not excluded by paragraph 6 If a supplier falls within a category of supplier listed in paragraph 3.3 or 4, the value of procurement from that supplier is multiplied by the applicable factor listed in paragraph 3 3.

B-BBEE Procurement Spend can be measured in terms of formula “A” in Annexe 500(A)

The 6-BBEE Procurement Spend for a Measured Entity in respect of a supplier IS calculated by multiplyingthespend contemplated by paragraph 5 (and not excluded by paragraph 6) in respect of that supplier by the supplier‘s B-BBEE Recognition Level

A Measured Entity’s Total Procurement Spend is the total of all amounts calculated in terms of paragraph 7 3

The Calculation of Preferential Procurement Contributions to 8-&BEE A Measured Entity receives a score for procurement in proportion to the extent that it meets the compliance target.

The Measured Entity’s score for Preferential Procurement contributions to E-BBEE under the preferential procurement scorecard can be calculated in terms of formula “8” in Annexe 500(A).

64 No. 29617 GOVERNMENT GAZETTE, 9 FEBRUARY 2007 ~ ~~

ANNEXE 500(8)

A E-GBEE PROCUREMENT SPEND.

5 THE CALCULATION OF PREFERENTIAL PROCUREMENT CONTRIBUTIONS TO B-BBEE

I

STAATSKOERANT, 9 ---




1 .1 the Enterprise Development (ED) scorecard;

1.2 the key measurement principles for calculating Qualifying Enterprise Development Contributions; and

2 The Enterprise Development Scorec

codes of good on i, · staatskoerant, 9 februarie 2007 no. 29617 3 general notice notice 112 of...

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